Central Banks issue fiat currency as a tax credit in their capacity as fiscal agents of the Treasury and they spend this by crediting the memorandum accounts of clearing banks. The Treasury then issues dated interest-bearing Debt which is purchased by private banks.

Private banks also create - as sub fiscal agents of the Treasury - what are 'look-alike' tax credits and these are indistinguishable from central bank money. This virtual cash is then either spent - by crediting Central Bank memorandum accounts - on purchasing goods, services or assets (particularly treasury debt) or lent by entering into a sale and repurchase agreement of the cash asset.

The misunderstanding which permeates Economics is to regard the relationship between Treasury and Central Bank as a counter-party relationship when it's an agency relationship.